Sheahan and Lock secure compromise on BCI debts

John Sheahan and Ian Locke have obtained the imprimatur of the Federal Court for a deal which will see significant sums paid to the Australian Tax Office (ATO).

The deal represents a partial settlement of the long running BCI Finances dispute, but in his judgment of September 28, 2018 Justice Richard White was at pains to remind the South-Australian-based practitioners that if this deal goes sour it’s on them.

In Sheahan, In the matter of BCI Finances Pty Limited (in liq) [2018] FCA 1499 the judge explained how Sheahan and Locke applied to the court ex parte last week for orders approving their entry into a deed of compromise of various judgment debts obtained by the pair in their capacity as liquidators of BCI Finances Pty Limited, Binqld Finances Pty Limited, EGL Development (Canberra) Pty Limited and Ligon 268 Pty Limited.

The other parties to the deed are directors and officers of the BCI entities in liquidation, along with members of the Binetter family and companies associated with them. At this point let us familiarise ourselves with the immediate background.

On the 18th of November 2016 Justice Jacqueline Gleeson ruled that the liquidated BCI companies were entitled to judgment from most but not all of the respondents in the order of $120 million.

The unsuccessful respondents appealed the Gleeson decision, as did Sheahan and Locke in respect we presume of the respondents who avoided judgment. That appeal was heard in August this year and judgment has been reserved.

For reasons unknown, the parties appear to have been suddenly galvanised into action with the result that they have agreed to a compromise of the judgment debts.

In his affidavit in support of the ex parte application Locke deposed that: “The parties to the Appeal Proceedings have agreed to resolve all matters in dispute between them for consideration of, amongst other things, a significant payment to each of the Liquidated Companies (“Proposed Resolution”).”

Creditors of the companies, among which the ATO is paramount, have approved the liquidators entering into the agreement but court approval was required because the proposed agreement contains obligations, the performance of which may extend beyond a period of three months.

Justice White went through the relevant authorities and then ensured no reader might form a mistaken view about the court’s role in such a process.

“The Court does not simply rubber stamp whatever is put forward by a liquidator, but the Court’s approval is not an endorsement of a proposed agreement,” he said.

“It is instead a permission for liquidators to exercise their own commercial judgment. The Court satisfies itself that there is no good reason to intervene in the administration of the winding up insofar as that is reflected in the agreement for the compromise of the debts.”

In the light of the speed with which the compromise was conceived and brought before the court the decision of the Court of Appeal may prove illuminating, depending of course on when it’s delivered.

About the Author

Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

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